After evaluating Null Company\'s manufacturing process, management decides to es
ID: 2522194 • Letter: A
Question
After evaluating Null Company's manufacturing process, management decides to establish standards of 3 hours of direct labor per unit of product and 15.90 per hour for the labor rate. During October, the company uses 19,100 hours of direct labor at a 307,510 total coset to produce 6500 units of product . In November, the company uses 21,400 hours of direct labor at 346,680 total cost to produce 6,800 units of product. 1) compute the rate varieance the efficiencty vairiances and the total direct labor cost variance for each of these two months October and November
Explanation / Answer
Standard Labour hour per unit = 3 Hours
Standard Rate per Lobour Hour (SR)= $ 15.90
Direct Labour Rate Variance:
Direct Labour Rate Variance = Actual Labour Hours * ( Stnadard Rate - Actual rate)
If answer is positive, variance is favourable & if negative variance is unfavourable
October Month:
Direct Labour Rate Variance = AH * (SR-AR) = 19100 * (15.90-16.10) = -3,820 Unfavourable
November Month:
Direct Labour Rate Variance = AH * (SR-AR) = 21,400 * (15.90-16.20) = -6,420 Unfavourable
Direct Labour Efficiency Variance:
Direct Labour Efficiency Variance = Standard Rate * ( Standard Hours - Actual Hours)
October Month:
Direct Labour Efficiency Variance = SR * ( SH - AH) = 15.90 * ( 19,500- 19,100) = 6,360 Favourable
November Month:
Direct Labour Efficiency Variance = SR * ( SH - AH) = 15.90 * ( 20,400- 21,400) = -15,900 Unfavourable
Negative value indicates Unfavourable Variance
Production Standard Labour Hrs (SH) Actual Labour Hour (AH) Actual Rate (AR) October 6,500 19,500 19,100 16.10 November 6,800 20,400 21,400 16.20Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.